A government takeover of any industry invariably courts calamity. Canadian economic history is replete with examples – from oil and natural gas to mining to transportation to manufacturing. The results are always the same. Public control brings rising costs, falling supply, reduced choice, poorer quality, inefficient production and an absence of innovation. Unfortunately for parents and taxpayers, Ottawa’s recent capture of the childcare sector is already proving no exception to this long record of failure.
In 2021, the federal government committed $30 billion over five years to establishing a nationwide $10-a-day childcare system. After this initial five-year commitment, continuing federal costs for the program are budgeted at $9.2 billion annually. All told, it is an enormous bill for taxpayers.
Yet researchers at Cardus, a social policy think tank, have calculated these budgeted amounts are nowhere near sufficient to cover future demand. By 2026 they estimate there will be unfunded costs of at least $4 billion annually, and potentially much more. With unsubsidized childcare costing as much as $60 per day, Ottawa’s plan to provide it at a fraction of its real cost will surely stretch the existing system to its breaking point. If the federal government doesn’t vastly overspend, either the provinces will have to cover the tab, or the promise of universal, affordable childcare will soon fall into ruins.
Whatever the final costs several years from now, however, the evidence from across the country shows clearly that the current flood of government spending and spectre of public control have not provided parents with cheap or accessible childcare. Rather, the story is one of endless crisis.
Shortages, Shortages, Shortages
We begin our cross-country survey in British Columbia. The City of Vancouver currently estimates it is short 15,000 childcare spaces. At the end of November, a senior planner told city council that “it’s a desert everywhere” when it comes to finding childcare spaces. In Langley Township, one of B.C.’s fastest-growing suburban communities, a “desperate childcare shortage” has prompted plans to turn parkland into daycare centres. And that’s not only because of rising demand; as of October 2023, the township actually had 15 percent fewer childcare spaces than in January 2020.
In the Okanagan Valley, local media reports childcare “seems to have reached a crisis point.” In one representative example, a couple that moved from Vancouver to Kelowna now cannot find childcare for their 12-week-old daughter, despite being on more than a dozen waiting lists. They are considering moving back to Vancouver to live with the mother’s parents.
Throughout the province, the stated goal of delivering affordable childcare to families in need is falling far short. University of British Columbia childcare researchers found their efforts to simply study the new program stymied by a lack of suitable subjects. “Our initial study intended to only interview low-income women who were single moms accessing those $10-per-day spots,” Lea Caragata, director of UBC’s School of Social Work, told CTV News. “After six months of intensive recruitment, we could only find 13 across the province.” Recruiting a mere baker’s dozen of needy single mothers with access to subsidized spaces in all of B.C. is not encouraging news.
Surveying the news elsewhere in the country, the story is much the same. In the Northwest Territories, despite millions in increased spending by the territorial government, daycares are shutting down for lack of staff. The $10-a-day scheme is “floundering” in Saskatchewan as well, due to staffing shortages. “The workforce is extremely bleak,” a childcare director in Regina said last October. In Manitoba, the province’s public-sector union president says there is a “childcare crisis” and families across the province “continue to struggle with affordable, accessible childcare.” The Toronto Star reports that, “Toronto is set to fall well short of its target for new child care spaces by 2026 and is already facing a shortage of trained daycare workers for spots that are currently available, according to a city report and child care advocates.” North of Toronto in Simcoe Country, waiting lists are said to be “insane.” And on the East Coast, CBC News reports that activists and unions in Nova Scotia are calling for increased government subsidization amidst a “severe shortage of spaces.”
Just two years after the federal government launched the single biggest spending commitment on childcare in Canadian history – a multi-multi-billion-dollar plan that explicitly calls for a dramatic increase in Canadian families’ access to cheap childcare – a greater percentage of children are currently being cared for at home by their parents than was the case in 2019.
Everywhere you look are tales of shortages in childcare spaces and staff. It is hardly an auspicious beginning for a supposedly universal and affordable childcare plan.
More Parental Care
The statistical evidence concerning the federal government’s foray into heavily-subsidized childcare seems even more damning than the anecdotal evidence above. Statistics Canada data released last month shows the proportion of children aged 0 to 5 years who are in childcare arrangements of all sorts fell from 59.9 percent in 2019 to 56.1 percent in 2023. While there has been an uptick in children attending centre-based care, this was offset by a larger decline in other forms of non-parental childcare, including care by individuals who operate home-based childcare businesses. The net decline in childcare arrangements holds for eight out of ten provinces. And while the decrease is not statistically significant in most individual provinces, the nationwide decline is.
Table 1 makes plain this stunning result. Just two years after the federal government launched the single biggest spending commitment on childcare in Canadian history – a multi-multi-billion-dollar plan that explicitly calls for a dramatic increase in Canadian families’ access to cheap childcare – a greater percentage of children are currently being cared for at home by their parents than was the case in 2019.
Table 2 reveals that this decrease in childcare attendance is even more pronounced when considered in absolute figures. The number of children aged 0 to 5 years in childcare fell by approximately 118,000 from 2019 to 2023, a decrease of 8.5 percent nationally, with childcare attendance essentially flat in a few provinces and down in the rest – precipitously so in Ontario. Ottawa’s plan to provide affordable spaces for needy families has gotten off to a particularly disastrous start.
What Defines Success?
Even if the above charts showed childcare attendance to be increasing on a proportional or overall basis, this would not necessarily be sufficient to characterize the program as a success to date. Families receiving subsidized childcare may actually be left worse off under the new arrangement since expanded government control reduces their ability to make their own childcare choices. While some families may prefer parental or other forms of care to officially-sanctioned childcare facilities, Ottawa’s plan to provide cheap centre-based daycare at a fraction of the price could shift their choices towards taking advantage of the subsidies. Everyone loves a bargain, especially parents. In this way, government policy subverts parental choice.
And yet, despite the coercive effect of massive subsidization and the threat of massive future taxation to pay for it, the statistics currently show childcare attendance has actually decreased over the past four years. Childcare advocates might suggest this decline simply reflects a slow rebound following the pandemic. After a large drop in 2020 caused by the dislocation of Covid-19, childcare attendance is finally beginning to climb again. At the same time, advocates might also claim the shift from unlicensed home-care to licenced childcare is a good thing.
Such a story about recovering demand doesn’t make much sense, however. By 2023, Covid-19 was firmly in our rearview mirror. If we are now still simply waiting for demand to pick up, there should be plenty of excess capacity in the childcare system to absorb new families as they return to formal childcare. But that is the opposite of what we are actually seeing. As our cross-country survey above revealed, there are widespread shortages everywhere. And even among families who have enrolled their children in childcare, there has been a material increase in their difficulty in finding it.
As Table 3 reveals, 36.4 percent of parents with children in childcare reported difficulty finding spaces for their children in 2019. By 2023 this was up to 46.4 percent. And this result is visible in every single province. This roughly 12-percentage-point increase means that the number of parents having a hard time finding childcare has increased by approximately one-third. This is one of the reasons why it’s no exaggeration to call the Trudeau Liberals’ new childcare policy a calamity.
Another piece of evidence in the difficulty of finding childcare is the growth in waiting lists. Statistics Canada first began collecting such data in 2022, when 19 percent of parents with children aged 0 to 5 years who were not using childcare said they had a child on a waiting list. By 2023, this figure had increased to 26 percent, with younger children likeliest to be on a waiting list. Among infants younger than 1, the proportion waiting for childcare increased from 38 percent in early 2022 to 47 percent in 2023. The constant refrain of Canadians suffering from record waiting times for health care can now be adopted by parents as well: access to a waiting list is not access to childcare. Shortages and waiting lists are, of course, a perennial hallmark of all government-controlled sectors, not just Medicare.
The “Affordability” Mirage
The central claim by the federal and provincial politicians responsible for the ongoing childcare disaster is that government will make childcare more “affordable” for families. Statistics Canada’s recent report does show that in 2023, average parental fees were lower than in 2022. While it may be harder to find a spot, those lucky few families who have been able to access a heavily-subsidized childcare space have seen their costs comes down. Yet this only represents the most visible aspect of the cost. In the absence of externalities, basic economic theory tells us we should expect a net loss from any arrangement that involves distortionary subsidies and taxes. Subsidies to one group may be offset by taxes on the other, but overall there is a net loss to society as government piles on extra costs for bureaucracy and administration, in addition to the loss of individual choice.
When measuring costs, what counts is the total bill. Childcare does not become more “affordable” by forcing everyone to pay for it through higher taxes instead of parents being allowed to purchase it voluntarily. All this new payment arrangement means is that by turning the spending decision over to government, individual families have lost control over both how their money is spent, and how much they spend in total.
In order for government to actually increase affordability across the entire system, it must reduce actual costs – not just the price being charged. This entails improving the efficiency of childcare delivery. But government is better known for reducing efficiency. Ample evidence of this can be seen in other sectors dominated by government, including Canada’s shambolic and expensive socialized health-care system, steadily declining student achievement in the face of increased school spending, government-protected agricultural cartels and various green energy disasters.
While government planners spend other people’s money and regulate other people’s businesses with little concern of the consequences, entrepreneurs risk their own money to build their own businesses. Their livelihoods depend on their ability to operate efficiently and deliver excellent childcare.
The hope that government control will increase efficiency seems absurd. Besides the widespread mismanagement and knowledge problems that invariably plague government economic planning, there are considerable administrative costs dumped onto childcare operators – with more on the way. The result of Canada’s government takeover of childcare is not greater affordability, but higher costs, less choice and lowered quality.
Crushing the Private-Sector
There are many Canadians who, unlike government, do have expertise in running childcare efficiently while providing a high level of service: childcare entrepreneurs. While government planners spend other people’s money and regulate other people’s businesses with little concern of the consequences, entrepreneurs risk their own money to build their own businesses. Their livelihoods depend on their ability to operate efficiently and deliver excellent childcare. Unfortunately, the federal government’s current childcare plan constitutes a direct assault on private, for-profit childcare operators as it imposes a virtual public-directed monopoly on the sector.
The guiding principle of the federal government’s recent childcare legislation is to “facilitate access to early learning and child care programs and services – in particular those that are provided by public and not for profit child care providers.” [Emphasis added] A Senate Committee similarly recommended that federal agreements with provinces and territories limit private equity investments in childcare to “focus on providing funding to create a high quality public early learning and child care system.” The exclusion of private for-profit childcare is even written into some of the federal/provincial government childcare agreements.
In 2021 Prime Minister Justin Trudeau said the goal of the federal plan in Nova Scotia was to move “to a fully not-for-profit and publicly managed system.” Private operators provided 56 percent of the province’s childcare spaces at the time. Ottawa’s determination to rid the province of entrepreneurs who provide a majority of the capacity led to an immediate supply crisis. The province later modified its funding arrangements with private operators to keep them afloat, but recently rolled out new programs for the exclusive benefit of non-profit childcares. In other provinces where private-sector providers also comprise a majority of existing childcare spaces, such as New Brunswick, plans to support non-profit operators at the expense of entrepreneurs are similarly wreaking havoc on the supply of childcare.
Alberta has made some effort to accommodate for-profit private-sector childcare centres, which account for about 70 percent of the province’s spaces. Unfortunately, the latest funding agreement – which childcare operators have until the end of this month to sign – is undoing all this goodwill. Privately-owned childcare centres that choose not to sign the agreement and thus forgo government subsidies will be severely disadvantaged in a sector awash with government funds. But if they participate in order to access the subsidies, they will be subjected to severe administrative burdens and government price limitations that effectively starve them of revenue as costs inflate. Compounding the problems for private sector childcare operators, the government-paid portion of the fees arrives on a delay of 40 days or more.
“It is virtually impossible for my centre to remain financially viable under the new agreement,” says Christine Pasmore, owner of a Grande Prairie childcare centre, in an interview. Adds Krystal Churcher, chair of the Association of Alberta Childcare Entrepreneurs (AACE), “I don’t know how anyone can stay open moving forward. There is no way you can pay your rent and your wages and everything with no access to your revenue for 40 to 45 days.” Media reports from across the province, including Calgary, Lethbridge and Sherwood Park, observe that “daycare operators say they’re struggling to keep their doors open mainly due to the Alberta government’s new payment model and a fee cap.”
And this is not solely an Alberta, or for-profit issue. In Ontario, for example, YMCA, the largest non-profit childcare operator in the province, is also complaining that the current funding arrangement with the province is untenable. “The current approach to revenue replacement funding is insufficient, leaving many non-profit operators with deficits and uncertain outlooks,” the YMCA said in a statement.
Regardless of any systemic problems with provincial funding arrangements, however, overt government discrimination against for-profit childcare operators through additional red tape, denial of subsidies and/or the creation of special funding programs exclusively for non-profit operators is proving calamitous for entrepreneurs as well as the families they serve across the country. And, in damaging them, it is also damaging the wider cause of childcare. Because if greater supply is required – and it is sorely needed due to the new, artificially-low price mandated by Ottawa – it’s the private sector that is ideally situated to provide it.
These two forces – mandated cheap daycare and constrained supply – have left families confronting massive shortages and waiting lists. It is a scenario markedly similar to complaints made about Canada’s crisis-prone Medicare system.
The animosity shown towards private childcare operators is also deeply ironic, given how often and loudly the federal Liberal government proclaims its feminist credentials. “You have female entrepreneurs like myself, who are educators, and often mothers, who have met a need in their community,” AACE’s Churcher told a Senate Committee meeting last October, “By excluding for-profit child care, we run the risk of bankrupting and eliminating small programs like mine.” With 96 percent of the industry’s workers female, Churcher blames the government for wreaking havoc on a business that is led almost entirely by women.
The Chaos: Cui Bono?
We can now consider the early returns from Canada’s grand experiment in national $10-a-day childcare. As we have seen, there are severe shortages of spaces and staff from coast to coast. In fact, more parents are looking after their own children at home than was the case in 2019. Such a result may seem counter-intuitive, given that federal and provincial governments are spending billions of tax dollars annually ramping up funding for new spaces and higher staff wages. But this is the entirely predictable result of a poorly conceived plan to enact a government takeover of what was once a mostly market-based sector.
Dropping childcare to the low, low price of $10-per-day has inevitably pushed parental demand higher. Yet the non-profit and public-sector operators who are now supposed to provide this service are resistant to change and habitually slow to add supply. Nimble, responsive and predominately female private-sector entrepreneurs are well-placed to respond quickly to changing demand. Yet they are being forced out of the sector by policy design and neglect. And these two forces – mandated cheap daycare and deliberately constrained supply – have left families confronting massive shortages and waiting lists. It is a scenario markedly similar to complaints made about Canada’s crisis-prone Medicare system.
Here one must ask: cui bono, or who benefits from all this chaos? There are two obvious groups. First is the cabal of childcare advocates and progressive politicians who have long praised the ideological benefits of an exclusively non-profit childcare system. These voices are animated by a profound distaste for profit-making of any kind. If their plans have produced a chaotic shortage of spaces, that is simply proof that even more subsidies will be required in the future.
The second group of beneficiaries are those public-sector unions whose membership will soon grow as legions of new unionized childcare workers replace those for-profit, non-union operations currently being squeezed out of the system. Judging by experience in Quebec, these unions will soon use their new-found powers to shut down the economy as they leverage ever-greater wage demands from the system.
As for the losers, that’s the rest of us forced to pay for another disastrous government takeover of a once-robust, market-based industry.
Matthew Lau is a Toronto writer specializing in economic and financial issues, and a regular contributor to the Financial Post.
Source of main image: Shutterstock.
